Updated: Sep 8
“Mine, Mine, Mine”- something one might say after they purchased their first house. I mean, would you not be jumping for joy if you had just bought a house-I’m sure you would.
I feel comfortable saying that generally, most Americans feel that owning a house is part of the “American Dream”. I know as a child, especially as a girl I used to dream of owning a house, having a white picket fence where I could sit on my porch and watching my grandkids play. Clearly, I was thinking very far into the future then, but now that I am older I find myself trying to make that dream more of a reality.
Buying a house is more than just the material of having the house. A house is a long term investment, potentially a token that can be passed down to children and quite frankly a showing of stature within your community. Many people have their own reasons for wanting to own a home, but for whatever reason, it is always good to learn about different ways to obtain that goal. There is however one common factor that should be included in any guide you use to buying a house, and that is saving money. I believe if you make anywhere from $12-$16 then the information I'm about to give you is going to change your life.
So, let's say you make $12 an hour. This means you make around $1,400.00 a month. With that being said your rent should not be much more than $500 a month, which if you're in Memphis TN, can easily be obtained by trying out a property like Winbranch Apartment Complex or Thompson Court. Now that you have your living arrangements settled we need to discuss how much money needs to be saved to get you this home and how to save it.
So, we're going to set the goal to save $15,000 in five years. I'll explain why $15,000 later on. If we divide $15,000 by five years, then that means you need to save $3,000 a year. Honestly, that's not that much money. If we honestly consider all the frivolous purchases we tend to make a lot of us probably mismanage about $3,000 a year. You've done your math and now you know how much to save, so how do you save it? The answer is dedication, accountability, and a plan. The first thing to do is make the decision to save your tax return for the next five years up to $3,000. If you make more, then you can choose to save that or spend it. However, if you make less than $3,000 with your tax return, I would consider dividing up the remaining balance across your pay periods for the year and make deposits into your savings. This requires you to be accountable and follow the plan that you have set for yourself. If you choose not to buy that cool car, big TV or other things we tend to lean towards it helps build your down payment. This means that in five years you would have your $15,000 we talked about before. The $15,000 you save will be your down payment for your home.
Remember earlier I said I would tell you why I set the goal amount at $15,000, well now is that time. If you have bad credit, evictions, and collections your interest could be 4% and you could be requested to pay a down payment of 20%. However, if your credit is decent and you are 25 years old now by the time you turn 30 you can buy a quality house making minimal income. You would be living in your own house as a young adult and not have the headache of living in an apartment.
So, let's say now you're 30 and have the $15,000 for your down-payment. The next course of action is to find out the cost of the houses you can afford. Well, if you're making the $12 an hour we suggest that your monthly mortgage not be over $415 including the taxes and insurance. At 4% interest with 20% down the house will be worth a total of about $90,000. Then, by the age of 60, you will own that home and will more than likely be worth more than the initial $90,000. If you choose a cheaper home, let's say a $50,000 home with a $15,000 down payment you could possibly only have to pay $200 monthly- that's lower than most people's monthly rent for an apartment. This is why saving your tax return is so important. It plays a pivotal role in ensuring that within 5 years of renting your apartment you could buy a house, with a mortgage cheaper than your rent.
Crazy, right? No, it is honestly that simple. Save your tax return, and if you make less than $3,000 in tax return income than you can either extend the years of saving or compensate the balance with each pay period from your job. You are investing in yourself and in your future. Let's say you retire and only receive $750 in Social Security income, guess what, if you own your home there is no one to pay rent. Imagine if you had to use that same $750 towards renting an apartment not considering all your other bills. It's time we start planning our lives better and having a plan. If we rely only on plan A, then if it falls through, we will fall as well. A plan B will secure you if plan A turns out to be a dud.
In closing, you can use the idea above and change the numbers up as you need based on your circumstances, but ultimately you need a plan. Investing in yourself will always be beneficial as long as you plan accordingly. Your tax return is a lump sum of money that can really push your future forward if applied in a constructive way. Sometimes we should consider our long term goals and analyze if our life is moving in that route. If not, it's time to start a new plan.
Happy House Hunting!
You can always check how to rent an apartment with us :)